Brexit and Commercial Contracts
The following potential changes could materially affect the commercial bargain underlying existing commercial contracts:
- the imposition of tariffs,
- import/export licences being required (or existing import/export licences issued by the UK no longer be valid for shipments to the EU from third countries or vice versa)
- restrictions on the freedom of movement of people
- more change in exchange rates.
Changes in the underlying legal landscape may also affect some existing contracts profoundly, for example (subject to any transitional arrangements):
- Intellectual Property – The most commonly owned type of IP is copyright, which will remain largely unaffected by Brexit other than in relation to some cross-border issues. Brexit will have no direct impact on IP rights that subsist, or are registered, as UK rights, such as UK registered trade marks and the UK design right and copyright. In addition, UK and European patents will continue to be enforceable in the UK in the same way as before Brexit. However, there are several important types of rights that arise in the UK under EU regulations which may need to be ported across to become UK-specific. The main ones are EU trade marks, Community registered designs and the (unregistered) Community design right.
- Product liability – Brexit has the potential to have a significant impact on the UK’s product safety and product liability regimes, for example, in relation to the acceptability in the UK of products designed, manufactured and labelled to EU standards and the acceptability of UK conformity assessment, ‘CE’ marking and notified bodies processes across wider Europe.
- Data protection – If the contract involves the transfer of any personal data between the UK and the EU, additional contractual clauses (known under GDPR as Standard Contractual Clauses) or other mechanisms may need to be put in place to ensure those transfers can continue post-Brexit.
- Professional qualifications and regulatory frameworks – In the event of a “no deal” Brexit the UK will no longer be part of the EU’s single market and customs union, the four freedoms (the free movement of people, goods, services and capital) will no longer apply, and there will no longer be mutual recognition of professional qualifications and regulatory frameworks.
It can be useful exercise to review the position under your existing commercial contracts now to identify any risks that may arise. How flexible is the contract? How are potential risks and liabilities apportioned between the parties in the contract? If the contract can be terminated on short notice, that might provide a useful escape route but also raises the risk that the counterparty might also terminate.
Businesses should also consider how Brexit might affect a new contract and, so far as possible, provide accordingly.
Our team can advise you on the potential impact on your commercial arrangements and contracts and how best to protect your interests. To discuss, please contact Partner, Giles Searby at email@example.com